If you’re on an income-driven repayment (IDR) plan, you probably received the following e-mail from the Department of Education, asking you if you would like to recertify your IDR plan early, before your scheduled recertification date:
Recently, you received a message from your federal student loan servicer regarding the extension of 0% interest and the suspension of payments on your student loans. You are currently enrolled in an income-driven repayment (IDR) plan. Although you are not required to recertify right now, if your income has changed significantly, you may want to consider recertifying your IDR plan before your scheduled recertification date. If you recertify now, your monthly payments will resume at the new amount after the payment suspension ends on Dec. 31, 2020.
So, should you recertify early? If your income dropped (job loss, etc.), you should definitely recertify early, so that once payment suspension ends on Dec. 31, 2020, your IDR monthly payment amount is lower. On the other hand, if your income has increased, you should not recertify early (unless you want to pay more); just hang in tight until your normal annual recertification period.
Check out the following Q&A from the Department of Education (https://studentaid.gov/manage-loans/repayment/plans/income-driven/):
Will I always pay the same amount each month under an income-driven repayment plan?
No. Under all of the income-driven repayment plans, your required monthly payment amount may increase or decrease if your income or family size changes from year to year. Each year you must “recertify” your income and family size. This means that you must provide your loan servicer with updated income and family size information so that your servicer can recalculate your payment. You must do this even if there has been no change in your income or family size.
Your loan servicer will send you a reminder notice when it’s time for you to recertify. To recertify, you must submit another income-driven repayment plan application. On the application, you’ll be asked to select the reason you’re submitting the application. Respond that you are submitting documentation of your income for the annual recertification of your payment amount.
Although you’re required to recertify your income and family size only once each year, if your income or family size changes significantly before your annual certification date (for example, due to loss of employment), you can submit updated information and ask your servicer to recalculate your payment amount at any time. To do this, submit a new application for an income-driven repayment plan. When asked to select the reason for submitting the application, respond that you are submitting documentation early because you want your servicer to recalculate your payment immediately.
You’re not required to report changes in your financial circumstances before the annual date when you must provide updated income information. You can choose to wait until your loan servicer tells you that you need to provide updated income information at the normally scheduled time. If you choose to wait, your current required monthly payment amount will remain the same until you provide the updated income information.
Ready to recertify early? Here’s what to do (from the Department of Education’s email):
Actions to Take Before Dec. 31, 2020
1. Log in to your account on StudentAid.gov to update your contact information and to confirm which servicer holds your student loan(s). If you have moved, changed phone numbers, or have a new email address, you also should contact your servicer to provide updated contact information.
2. Consider what your financial circumstances will be when repayment resumes in January 2021. You might want to recertify early. If you recertify, your new payment amount will begin after the end of the payment suspension. Learn about IDR options.
3. If you can make payments while interest rates are set at 0%, you could make progress on paying down your unpaid principal—possibly reducing the overall cost of your loan(s). Your payments would be applied first toward the unpaid interest and then applied to the unpaid principal.
Reminder: Your loan(s) have been set at a 0% interest rate, and payments have been suspended, until Dec. 31, 2020. During this time, you are not required to make monthly payments, and interest will not accrue. Payments are scheduled to resume in January 2021.
We’ll continue to communicate with you to help prepare you for Dec. 31, 2020, when the 0% interest rate and payment suspension are scheduled to end. We’re available to help you understand the impact of these benefits on your federal student loans. For the latest information about the current relief measures and resulting flexibilities for student loans, visit StudentAid.gov/coronavirus.